If you live in Louisiana, you get to enjoy the lowest property taxes in the country at .18%. If you live in New Jersey, though, you have the worst in the country at 1.89%. As you can see, there’s a wide range in how much people pay in property taxes. 

So how does property tax work? If you’ve never owned a home before, then you may be unfamiliar with this type of tax. It’s a tax, but it isn’t based on how much you bought your home for.

Keep reading, and this guide will explain what you need to know. 

How Does Property Tax Work?

When you own property, you have to pay taxes on it. This could be real estate, a vehicle, or other property that you own. Most people refer to real estate when they talk about property tax; taxes for machinery and cars are called an ad valorem tax. 

Two criteria get used to determine the total amount of taxes owed. Where the property is located, and its overall value will influence the amount of tax owed. 

Determining Value 

Assessors or appraisers track real estate values and maintain extensive databases of real estate. Your home’s property gets assessed, and then the amount specified is what the taxes are based on. The assessed value will likely be lower than the market value. 

Consider Property Taxes When Buying a Home 

When you’re trying to buy a home, you’re busy gathering a ton of documentation. But there’s something you need to do before you print off your paystubs from https://www.paystubs.net. You need to make sure you can afford to maintain your home.

To determine what you’ll pay in property taxes, take your home’s assessed property value, and multiply it by the tax rate. You should then factor this amount into your budget. 

What If You Don’t Pay Your Property Taxes?

If you don’t pay your taxes, then you risk a tax lien getting placed on your property. This isn’t a seizure of your property. It’s a legal claim against your property or financial assets. 

When you sell the property, the government has a legal claim to the proceeds of your sale. Buyers can easily see if a property has a lien by doing a title search. 

Deduct the Property Taxes You Pay 

You can deduct up to $10,000 for the property taxes that you pay. You’ll need to fill out a Schedule A, and you’ll need to itemize your taxes. You can’t use the standard deduction. 

Plan for your taxes to take longer to prepare when you itemize your deductions. By taking this deduction, you can lower your tax bill. 

Plan for Property Taxes 

When you plan to buy a home for the first time, you’ll find yourself wondering, how does property tax work? It’s a simple calculation that you need to include when determining your budget. Knowing this tax can help you decide if you can afford your dream home. 

Check out our other articles for homebuyers for more helpful advice.